Inorder to prevent the real estate from becoming a tool for speculation and toimprove the residential property market, the three sub-laws of the newlyamended Equalization of Land Rights Act corresponding to the "permissionsystem for the purchase of residential property by private legal persons,"the "measures on reward for reporting," and the "restriction onthe contract switch and resale" came into effect on July 1 this year. Theselaws will have an impact on the real estate market, and such impact should notbe underestimated.

Inorder to regulate the purchase of residential properties by private legalpersons and to prevent residential real estate from becoming the subject ofspeculation by private legal persons, Article 79-1 of the newly amended Equalizationof Land Rights Act expressly provides that a private legal person shall obtainprior permission from the competent authority for the purchase of a house forresidential use and shall not transfer, assign, or apply for registration ofadvance announcement for five years after the purchase. In addition,considering the needs of some private legal persons in carrying out theirbusiness, Article 3 of the "Regulations on the Permit for Private Legal Personsto Purchase Housing for Residential Use" ("Regulations on HousingPurchase by Private Legal Persons"), specifies six types of exceptions tothe obtaining of a permit for the purchase of residential units by privatelegal entities, including dormitories, commercial rentals for residential use,health and welfare institutions, urban renewal and redevelopment of unsafe andold buildings, and others that have been announced by the central competent authority,with the aim of reasonably regulating the residential housing market and theright of living in a residential unit.

On theother hand, Article 6 of the "Regulations on Housing Purchase by PrivateLegal Persons" provides determination criteria regarding permit exemptionfor a building purchased by a private legal person for the purpose of jointconstruction, implementation or participation in urban renewal and urban unsafeand old building ("UOB") redevelopment: In addition to theconsideration that the residential property purchased by a private legal personshould meet the criteria of being more than 30 years old, unsafe, and notresistant to earthquakes, when a private legal person implements or participatesin an urban renewal case, the private legal person may be considered to havequalified for an exemption of a permit for the registration of residentialproperties only when the urban renewal process has reached the stage of apublic exhibition, and it is necessary for the private legal person to obtainthe residential property in order to continue the urban renewal process.

However,in practice, an urban renewal process needs to go through coordinating the  original house holders and applying forapproval from the competent authorities before entering the public exhibitionstage. Therefore, in the public exhibition stage, usually 80% to 90% of theoriginal house holders have already agreed, which means it is the final stage ofurban renewal . Few do implementers start the process of purchasing consolidationat this stage. Hence, this amendment does not seem to help developers incarrying out coordination for urban renewal projects. Moreover, under the currentlaw, in order to obtain the qualification of exemption from obtaining permitsas early as possible, it is very likely that developers will submit the casefor examination at the beginning of an urban renewal and UOB redevelopmentproject. If so, this not only increases the burden on administrative proceduresbut also increases the possibility of leaks during the review process, leadingto opportunists or individuals with ulterior motives taking advantage andincreasing the difficulties and obstacles in the coordination of the urbanrenewal projects. That would  contradict thegovernment's goal to promote urban renewal and the redevelopment of UOBs.

Secondly,the purpose of setting a "permit system for the purchase of residentialhousing by private legal persons" is to prevent speculation by privatelegal persons using real estate as a speculative transaction instrument.Therefore, after the newly amended Equalization of Land Rights Act came intoeffect, speculators, real estate agents, and sales agents have been subject torestrictions on resale by exchanging contracts, heavy penalties forspeculation, and registration of termination of contracts, etc. Moreover, withthe Central Bank announcing on June 16 this year that the loan-to-value ratiofor second households should not exceed 70%, it seems to be expected that the turnoverrate of real estate transactions will not be as fast as it was in the past.However, it should be noted that although it is necessary to carry out controlby strictly enforcing the tracing of the source of funds for the purchase of realproperties and to implement the combined house and land tax and the luxuryproperty tax in order to effectively curb the speculative behaviors of theprivate legal persons, it is also necessary to pay attention to not exceedinglyintervene in the real estate purchases by the private legal persons, so as notto hinder urban renewal projects and the redevelopment of UOBs.

Thisarticle was published in the Expert’s Commentary Column of the CommercialTimes. https://view.ctee.com.tw/tax/50978.html

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